Jill Kerby - Free banking is nearly gone

The withdrawal of “free” banking from AIB, unless customers leave €2,500 in their current account at all times, is just the latest stick that the bank has handed to its customers to beat it with.

The withdrawal of “free” banking from AIB, unless customers leave €2,500 in their current account at all times, is just the latest stick that the bank has handed to its customers to beat it with.

And while there isn’t much that any bank can do these days without being criticised, I’m not sure that the reintroduction (widespread free banking didn’t exist before 2005) of current account charges are grounds for closing one’s account and moving to another bank, as some critics suggest.

Moving accounts is a decision that takes some careful thought and is a lot more problematic and stressful than you might imagine.

I speak from experience, having moved my busy, 30-year-old current account from one bank to another earlier this year. The problem wasn’t with either of the banks who followed the Central Bank switching code perfectly well, but with the companies and services to whom I had arranged standing orders and direct debits: too many of them took their time about inputting new account numbers and addresses into their accounts.

The other issue on the bank switching front is that the charges-free field is shrinking: Ulster Bank is now the only bank to offer a full range of current account services with no monthly/quarterly fees or transaction charges, but it doesn’t apply to every account.

Like Ulster Bank, NIB and PTSB don’t require that customers leave hostage deposit either, though they do have quarterly charges, with or without individual transaction fees.

Meanwhile, every account holder with a debit/credit card or who still writes cheques is automatically charged government stamp duty. Every bank imposes penalties for unauthorised overdrafts, returned cheques and other infractions.

Is it really unreasonable for a bank to ask for some kind of payment – whether a flat a quarterly or annual fee for a current account facility with a choice of three or four different accounts and costs? I don’t think so.

But to ask someone to leave €2,500 (AIB, from May 28) or €3,000 (Bank of Ireland) on deposit in exchange for part or full no-fees banking is, especially if they are not offering to pay any interest on this money or provide any other benefit or service. One AIB customer I spoke to said he thought it was particularly rotten since he is never in overdraft and has far more than €2,500 on deposit with the bank.

Meanwhile, Ann Fitzgerald of the National Consumer Agency (see www.nca.ie/CurrentAccount for a comparison table of all current account fees and charges) claims that AIB is in breach of Central Bank rules that requires that it must act in the best interest of its customers at all time.

If this really were the case, we’d see AIB and Bank of Ireland and the other banks forced not just to reverse this hostage/cash requirement but to make other fees/charges/interest rates more affordable, especially for the thousands of customers they all encouraged to buy expensive mortgages, car loans and credit cards during the boom, but who cannot meet those terms and conditions anymore.

That’s unlikely to happen, of course.

If anything, the government is just standing by as variable rate mortgage borrowers subsidise tracker mortgage holders and deposit rates are put so high to discourage capital flight, but which must be subsidised by the introduction of higher costs to current account users and other borrowers.

If you can’t afford to leave a four-figure sum doing nothing in an AIB or BoI current account, or you don’t fancy the hassle of switching entirely to a new bank, then you should consider other ways to keep your banking costs down.

One way is to check to see whether your bank offers lower charges if you agree to do all your banking online. If you follow the protocols, online banking is safe, and it’s easier than you think. My new bank, NIB, even holds occasional “how to” seminars for older customers in particular who may be new to the internet or are nervous about doing their banking online.

Also, review your transactions and see if you can reduce them. Are all those standing orders, direct debits and ATM transactions absolutely necessary? Could you pay your bills at the post office or via their excellent new, free, online service www.mybills.ie?

How many ATM transactions do you do at 20 cents or 28 cents at AIB or BoI if you don’t have a transaction-free account? Going to the ATM only once a week after budgeting for the cash you intend to spend is certainly a way to cut down on both the charges and the risk of making too many discretionary purchases.

Finally, someone suggested to me last week that turning the country into an entirely cashless society – where the banks could, in effect, shut down all their expensive bank branches and require people to pay all bills, make deposits, transfer funds etc online and use debit or credit cards for ALL purchases – would be the way to cut down on the cost to both banks and customers of current accounts.

We’re moving in that direction anyway, says IPSO, the bank payment service organisation. Over three million bank customers have already registered online over €23 billion is now spent using debit and credit cards. Emulating countries like Denmark is the target: a typical Danish family uses just €17 in cash every week.

In an entirely cashless Ireland – something that the Central Bank is prioritising – a modest monthly or annual tariff to run an account may very well become the norm.

After all, we pick and choose our mobile phone tariffs – a service, incidentally, that no one expects to be provided “free.”